Property/casualty insurance brokers are “still the best house on a somewhat challenged block” as brokers fared relatively well during the 2016 fourth-quarter and full-year earnings seasons, investment banking firm Keefe, Bruyette & Woods Inc. said Friday.

The brokers performed well for both the quarter and for the year, with average organic growth for all of 2016 of 2.6% and margin expansion of 50 basis points, New York-based KBW said in a statement.

“We believe that P&C brokers are the most attractive P&C subsector for 2017,” the note said, “given the positive benefits they would see to organic growth and margin expansion from any lift in inflation and/or GDP, which we have not factored into our estimates.”

Commercial lines, KBW said, need to watch out for reserves. Only 14% of companies strengthened their reserves in the fourth quarter, the note said, down from 17% in the third quarter. Forty-four percent of standard and specialty commercial insurers reported declining reserve releases year over year, compared with 58% in the third quarter.

“We expect mostly fading releases for the balance of 2017/2018, consistent with the historical relationship between softening pricing and fading releases,” KBW said.

Reinsurers’ returns remain under pressure, KBW said. In 2016, reinsurers produced an average return on equity of 8.1% and 8.4% book value of equity per share growth--down from 9.9% ROE and 6.1% BVPS growth in 2015 — driven by more normalized catastrophes.

“The most significant topics to watch in 2017 are reserve strength, potential rising loss costs if inflation increases,” KBW said, “U.S. corporate tax reform, which could invite more competition into a space already seeing significant pricing pressure, and the possibility of a border adjustment that could have industry-wide repercussions and affect future M&A.”